Can HKTV win Hong Kong e-commerce battle?

Hong Kong has been a laggard relative to other mature markets in the region in latching onto the e-commerce trend, but the territory is now trying to catch up as consumer shopping habits change.

Thanks to the proliferation of “smart” devices and mobile apps, Hong Kong people are now more willing than ever to shop online, throwing up an opportunity for Internet vendors.

Leading overseas online platforms, particularly Alibaba-owned Taobao and US behemoth Amazon, currently grab most of the orders, but that hasn’t stopped a local entity — HKTV — from throwing its hat into the ring, albeit on a much smaller product scale.

Aided by strong promotions and advertising, HKTVmall has now become a leading online platform for Hongkongers to purchase daily necessities.

The new business has gained enough recognition to make people almost forget about the group’s television operations.

Last week, HKTV announced that the average daily number of orders on its online shopping platforms, namely HKTVmall and HoKoBuy, was 7,600 in December, and that the average transaction value stood at HK$537.

That marked a significant jump from previous months, as the average daily order numbers for September, October and November were at 6,000, 6,900 and 7,400 respectively, and the average transaction values were at HK$492, HK$464 and HK$527.

The two online platforms served more than 477,000 customers, chairman Ricky Wong Wai-kay said at a media briefing.

Given this record, can we say that HKTV has emerged a winner in Hong Kong’s e-commerce space?

Well, such conclusion is a bit premature, and the group has miles to go before it can declare victory.

Although Hong Kong is witnessing steady growth in e-commerce, online shopping constitutes a small portion compared with traditional shopping in the physical malls in the city.

According to the government, the “percentage of people that had shopped online in the last 12 months” rose from 7 percent in 2004 to 16 percent in 2009 and to 23 percent in 2014.

The current figure should be much higher given that more online shopping platforms entered the market from 2014.

Still, it would be a lot less compared to the online shopping figures in other major markets. Online shopping penetration in the UK, for instance, is said to be at 81 percent, while in the US it is at 78 percent.

It is a fact that online retail is less prevalent in Hong Kong than in many other well developed economies. But that doesn’t mean Hongkongers don’t love online shopping. It is well known that many locals browse shopping websites during office hours and make purchases through office computers.

However, many of them shop on Alibaba’s Tmall or Taobao platforms or that of global giant Amazon, rather than on Hong Kong websites.

Given this, online shopping platforms like HKTVmall must recognize their real competitors are coming from different countries, from China to US to UK to Japan, and that they must step up their game in terms of service as well as product offerings.

HKTVmall has the first-mover advantage in the local e-commerce market, as big traditional retailers such as AS Watsons’ Group and Dairy Farm Group — entities that control chain stores such as Parknshop, Fortress, Watsons, Wellcome and Mannings — are yet to pump in enough resources to develop their own online shopping business. Their focus is still on traditional shopping.

That said, HKTVmall has its own difficulties, as it explores the market on a trial-and-error basis and is on a learning curve. Taking away significant business from the established big chain stores won’t be easy.

One just needs to remember the bitter experience of media tycoon Jimmy Lai who invested billions of dollars in an online shopping venture named AdMart in the late 1990s to early 2000s, aiming to challenge the dominance of Parknshop and Wellcome.

The venture collapsed after the two big grocery chains allegedly urged suppliers to boycott AdMart, and as Hong Kong people also shied away from shopping online.

Lai’s initiative, one can argue, was somewhat ahead of its time. This time, HKTVmall has avoided making a direct challenge to the big players and is, instead, focusing on getting people to change their shopping habits.

The company launched an e-commerce incubation program, aiming to help youngsters and local small enterprises to expand online retailing.

One of its key initiatives is to expand its footprint to offline by opening around 15 physical stores in selected residential areas to promote its brand directly to the community, as well as to make the outlets serve as pick-up points for online customer orders.

Such online-to-offline strategy can bring in more potential customers, such as housewives and the elderly, to try the service. The stores can make people realize that online shopping is not an abstract concept.

As Hong Kong retailers take a conservative approach towards online business, e-commerce platforms like HKTV will enjoy a competitive advantage over offline merchants in the future.

If HKTV wants to make a name and be a long-term player, it should step up efforts to build customer loyalty and encourage the shoppers to buy more frequently.

Key to this will be enhancing its delivery service, getting the products to the customers’ doors in the quickest possible time.

HKTV has invested HK$140 million on a warehouse at Tseung Kwan O to help it deal with 35,000 orders a day and to speed up the delivery service.

The investment demonstrates Chairman Wong’s confidence in boosting the online shopping business and changing the shopping habits of locals.

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